Industry experts are reacting to the news that President Biden has signed it into law CHIPS Act 2022 on Tuesday. The act provides $52 billion for semiconductor manufacturing incentives and research investments, as well as a 25% investment tax credit for semiconductor manufacturing.
The Semiconductor Industry Association welcomed the signing, saying it would enhance US competitiveness by offering incentives to chipmakers.
“By enacting the CHIPS Act, President Biden and leaders in Congress strengthened domestic semiconductor manufacturing, design, and research, thereby strengthening the economy, national security, and American supply chains for decades to come’. according to a statement by SIA.
The share of modern semiconductor manufacturing capacity in the US has reduce According to SIA, from 37% in 1990 to 12% today. “This drop is largely due to significant production incentives offer by the governments of our global competitors, putting the United States at a competitive disadvantage in attracting new construction of semiconductor manufacturing facilities, aka ‘fabs. “
In addition, federal investment in semiconductor research was flat While other governments have invested significantly in research initiatives to strengthen their own semiconductor capabilities, the SIA said, and existing US tax incentives for R&D lag behind that of SIA. with other countries, SIA said.
Mike Burns, executive chairman and co-founder of iDEAL Semiconductor, says this is not just “a science and chip package” but “a sign that the US is willing to engage in heavier industrial policy if needed to counter non-market forces where technology is of national importance. The package is generally very aggressive as an attempt to limit the long-term trend driven by economic dynamics.”
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‘Activity series’ in fab . notifications
Over the years, the great cost disadvantage of setting up a factory or any other facility, including testing, packaging, and manufacturing raw silicon wafers in the US, has been one of the main reasons why the system ecological shift to Asia, according to Gartner’s report on the impact of the passage of the CHIPS Act.
“In certain parts of the chip manufacturing value chain, the US is 100% dependent on Asia, but with financial backing from this action, it is likely that this will change. Even before the act was passed, because of concerns about exposure to critical points of failure in the globalized supply chain, we saw a flurry of activity related to facility/facility announcements. factories… and many new projects are underway. “
The impact will be long term
Gaurav Gupta, vice president of emerging technologies and trends at Gartner, told TechRepublic that no immediate impact will be felt immediately.
The majority of investments will be at the forefront of making semiconductors 7 nanometers or less, not in mature or lagging technologies, Gupta said. Since semiconductor production can take several years, the earliest opportunity for customers to buy chips will be in 2024, he said.
“Even in 2024 and 25 when some chips are made here, it doesn’t mean that customers will buy chips here because there is still a high percentage that will be bought in Taiwan,” Gupta said.
However, the CHIPS Act is “a good start because there is a large disproportionate share of chip production with overreliance on Asia,” he said. It is important for the US to develop a more flexible and diversified supply chain in light of current geopolitical issues, Gupta said.
“It shows that the government has the right policies and can support the remanufacturing of chips, and it gives confidence to chipmakers who are at least thinking about” bringing their fab into the US.
Burns suggests that Congress may want to take a more regulatory approach to industrial policy. “The last time we saw things of this magnitude was after World War II, where at that time the government was specifically identifying the needs of the nation in the technology segments,” he said. At the same time, he noted that “there is a fine line to go between maximizing the benefits of industrial policy and intervening in private business strategy.”
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What will happen from the CHIPS Act?
According to Gupta, there are four expected effects of the CHIPS Act for America:
- Chipmakers and other players in the chip supply chain will rush to take advantage of government funds, subsidies and tax credits to set up factories and facilities in the US
- Fabless and OEM customers in the US will have the option to purchase locally produced semiconductors.
- Chip makers will compete for a limited pool of money, talent, fab equipment, and resources in the United States for their fab projects.
- The bans related to this act will prevent companies that receive funding through this act from investing in China.
Those barriers apply to companies including Samsung, SK Hynix and TSMC, Gupta said, who “will have to rethink their China strategy” about whether they want to expand there. or not, especially for advanced node logic and memory.
Consumers should also know which chips will be made in the US versus Asia, Gupta added.
He doesn’t believe that anything fundamental is missing in action. “What matters now… is how the funding is allocated and how the government tracks it,” Gupta said.
“The CHIPS Act says you can’t use money to pay dividends,” he explains. “Once the cash is put in place there has to be a mechanism to make sure that money is actually being used to build these facilities and hold them accountable,” he said. “The success of all of this will depend on the ability of companies to perform. That is the most important aspect.”
Gupta also commented that “I don’t think the government has taken such a step to support this industry for a while.”
Steps to take
In addition to rethinking their China strategy, Gartner recommends that chipmakers planning projects in the US align with action “by fully understanding how it will work from a awards and implementation”.
The company also suggested that companies evaluate the possibility of co-investing in factories/facilities with customers interested in purchasing US-made chips. They should also evaluate talent planning for projects over the next five to eight years “by establishing detailed roadmaps.”
Meanwhile, chip shortages are being addressed by inflation and higher commodity costs, which have dampened consumer demand for electronics, he said.
“We are also forecasting a downturn in the semiconductor industry with reduced revenue forecasts for both this year and next,” said Gupta. “So the shortage should be resolved by the second half of this year or in some cases, the first half of next year.”
